Decarbonisation, data, breakthrough? How the chemical plant engineering sector is organising its transformation

No issue has had a greater impact on chemical plant engineering in recent years than decarbonisation. Hardly any other issue has led to so much disillusionment. Many announced hydrogen, e-fuels and power-to-X projects have failed to progress to the final investment decision stage. Rising interest rates, uncertain off-take agreements, high electricity prices and a lack of infrastructure are holding things back. However, the transformation is still possible. It is simply becoming more selective and pragmatic, and more open to different technologies.

This is particularly evident in the case of hydrogen. The IEA estimated that the global installed electrolysis capacity would reach around 1.75 GW by mid-2024 – a fraction of the capacity announced in global project pipelines for 2030. Europe is now launching its first major plants, for example in Hamburg and Austria. Meanwhile, policymakers are attempting to counteract this. The EU is working on a 'legislative act for the accelerated decarbonisation of industry' to create demand for low-carbon products and speed up approvals for decarbonisation projects. Germany, for its part, is refining its National Hydrogen Strategy and discussing climate protection agreements, as well as additional funding for electrolysis projects. However, there is still a gap between announcements and investment decisions. For the chemical plant engineering sector, this means that hydrogen remains a future market, but not yet a mass market. To succeed here, companies need technology partnerships, standardisation and customers with robust off-take agreements, as well as a policy framework that brings together demand, networks and financing.

CCS, by contrast, is evolving more rapidly from a contentious issue to a project category. Several major projects have reached final investment decisions in Europe, and the EU Innovation Fund is providing substantial funding for CO₂ capture, transport and storage. Germany is creating a robust framework for industrial applications for the first time with the amended Carbon Dioxide Storage and Transport Act. For the cement, lime, chemical and refining industries, as well as waste incineration, CCS is not a desirable option, but often the only realistic means of reducing emissions. The difference from the past lies in customer logic: CCS is no longer merely being discussed because of pressure from regulators. It is being planned because customers are demanding products with a lower carbon footprint, as the cost of carbon is rising and because existing plants would otherwise lose value prematurely. Carbon management is not a single technology, but rather a new infrastructure chain.

As was evident from the first net-zero projects in 2022 and 2023, it is now clear that no single company can address the major transformation challenges alone. Chemical companies, technology providers, electrolysis manufacturers, industrial gas companies, and EPC contractors are forming closer partnerships. Many projects are the first of their kind, combining familiar equipment with new process chains, raw material grades and business models. Plant engineers must not only build processes but also industrialise them. This involves deriving robust designs from pilot data, defining interfaces, and modularising plants so that subsequent builds are not one-offs. 

The Northern Lights CCS project in Norway is one example of this. As part of the Longship programme, Equinor, Shell and TotalEnergies are helping to establish a complete CO₂ value chain there, from capture at the Heidelberg Materials cement plant in Brevik and other industrial sources, to transport by ship to the terminal in Øygarden and offshore storage in the Aurora field in the North Sea. Since the first phase was commissioned in the summer of 2025, the project has served to test a scalable business model, new operational processes, and interfaces between authorities, industrial partners, and EPC service providers in real-world operation. Following the investment decision for the second phase in 2025, capacity will be expanded from 1.5 to over 5 million tonnes of CO₂ per year by 2028, secured through long-term contracts with industrial customers including Yara, Ørsted, and Stockholm Exergi. This highlights the evolving role of plant engineering, which is no longer merely about constructing a plant, but also about defining a repeatable process and infrastructure platform in collaboration with customers and partners.

Due to the time horizon, the platform logic takes on new significance: large-scale chemical plants often operate for 30 to 50 years. Anyone planning a cracker or an ammonia plant today is setting emission profiles that extend well beyond 2050. Net-zero capability is becoming a planning requirement, even if the plant is not fully climate-neutral from the outset.

The greatest shortage in chemical plant engineering is not capital. It is people. Engineers, project managers, welders, site managers, commissioning engineers and automation specialists are in short supply in almost all major project regions. In Germany, mechanical and plant engineering firms have reported production bottlenecks due to a lack of engineering capacity for years. A study by the German Economic Institute forecasts that the German mechanical and plant engineering sector will face a shortage of around 180,000 skilled workers by the mid-2030s. Outside Europe, the issue has also become a risk for some time: in the USA, industry analyses show that several hundred thousand positions in construction and project management remain permanently unfilled. The sector would require hundreds of thousands more workers each year to fully meet the demands of project pipelines in industrial and energy plant construction, as well as data centres. Location analyses for the Middle East and Asia reveal that major projects in the oil, gas, chemicals and infrastructure sectors rely heavily on international engineers, site managers and specialist tradespeople, as local capacity is insufficient.

For chemical plant engineering, every additional decarbonisation, digitalisation and resilience task must contend with a labour market already operating at full capacity. At the same time, projects are becoming more complex, supply chains are becoming more political, and documentation requirements are becoming more extensive. This is why AI, modularisation and digital engineering are no longer just desirable options, but a matter of survival.

According to a study by the VDMA (the German Association of Mechanical and Plant Engineering), almost all major plant engineers are using or planning to use generative AI. However, only a fraction of companies are successfully making the leap from pilot applications to widespread implementation. The bottleneck is often not the AI model itself, but the data infrastructure: inconsistent engineering data, outdated documentation, unlinked systems and siloed data between planning, procurement, construction and operations. Companies that automatically evaluate P&ID schemes, analyse contract clauses with AI support or monitor supply chain risks in real time can gain a competitive advantage – but only if the data is correct. AI-supported engineering also has the potential to bring detailed engineering closer to core teams and partially neutralise the cost advantage of traditional low-wage locations. Furthermore, AI can help transform strictly sequential project workflows into concurrent engineering, i.e. more parallel processes that are iteratively coordinated, with shorter lead times and minimal interface losses.

Another key driver of efficiency is modularisation. It shifts value creation from the construction site to the factory floor. Modules reduce the risks associated with weather, labour and quality, shorten construction times, and make projects more predictable. Digital twins bridge the gap between engineering, construction and operation. Those who provide operators with not just a plant, but also a digital representation covering the entire lifecycle create added value and retain customers beyond commissioning. The MTP (Module Type Package) standard supports this approach by ensuring that flexibility is not compromised by proprietary interfaces. The MTP describes a module’s functionalities so precisely in semantic terms that it can be integrated into the higher-level process control system almost via 'plug & produce'.

Another new reality is that geopolitics has become a procurement parameter. The decision of who builds the plant, who orders it and which country the critical components come from is no longer solely determined by cost and quality. Supply chain security, export controls, sanctions and political affiliation all influence procurement decisions. Particularly sensitive in this regard are components that cannot easily be substituted, such as large process gas compressors and turbomachinery, special alloys for heat exchangers and reactors, catalysts and highly specialised measurement and control valves. High-pressure compressors and turbomachinery are often supplied by a small number of Western suppliers in Europe, Japan or the USA, while many valves, actuators and field devices are sourced from Asia. Catalysts, in turn, are heavily dependent on individual technology licensors. Export controls on certain high-performance materials or automation components, as well as Chinese export restrictions on critical raw materials such as chromium, nickel and rare earths, are forcing plant operators and EPCs to increasingly diversify their supplier portfolios and establish alternative sources of supply outside areas of political tension.

Meanwhile, the balance of power among suppliers is shifting: while Western corporations focus on access to technology, front-end expertise and risk management, Asian competitors are gaining ground with other strengths. Chinese EPC providers such as CNCEC or Sinopec Engineering offer low engineering costs, rapid project delivery and growing project experience. In many markets across the Middle East, Africa and Asia, they are strong competitors. Western plant manufacturers cannot compete with them on price in the long term. Their advantage lies in technology, front-end expertise, project management and digitalisation. Meanwhile, new opportunities are emerging, with an increasing number of US clients awarding contracts to Europe to reduce their dependence on China. Quality is thus also becoming a security issue.

While Asia and the Gulf are expanding traditional chemical capacities, Europe is seeking a new industrial profile in transition markets. High energy prices, CO₂ costs and slow approval procedures make new large-scale investments in basic chemicals unattractive in the long term – no company would invest billions in new capacity when existing plants are underutilised and competitors in the US or the Gulf have access to cheaper energy sources.

Rather than returning to the old model, the solution lies in areas where Europe is already leading the way in terms of regulation, technology and infrastructure, such as the electrification of industrial processes, CCS value chains, hydrogen infrastructure, chemical recycling, industrial biotechnology, battery materials, grid infrastructure and energy plants. The German Chemical Industry Agenda 2045 explicitly identifies electrification, biotechnology and the circular economy as key pillars. The VDMA's Large-Scale Plant Engineering division reports growth drivers in energy, recycling and infrastructure — areas in which European plant manufacturers are technologically well positioned.

This signifies a clear shift in focus for chemical plant engineering: the European project business of the coming years will be less driven by new crackers or fertiliser plants and more by CCS infrastructure projects such as Northern Lights, electrolysis plants for industrial hydrogen, pyrolysis and solvolysis units for chemical recycling and the electrification of existing process plants. These projects are more technologically demanding and are subject to stricter regulatory oversight. They also require stronger cooperation structures than traditional EPC contracts, which is precisely where European plant engineers can leverage their competitive advantage over Asian suppliers.

The future of the European chemical plant engineering business is thus emerging at the intersection of industry, energy and climate policy – where technological depth, front-end expertise and regulatory experience are more important than low engineering costs.

Chemical plant engineering is no longer grappling with the question of whether decarbonisation will happen, but rather how climate targets, investment discipline and productivity can be combined in real-world projects. Many hydrogen and power-to-X projects are still in the pipeline, while CCS value chains, carbon management infrastructure and chemical recycling are being incorporated into everyday EPC work much more quickly. The ability to industrialise processes in collaboration with partners, to create repeatability rather than one-offs, and to factor in net-zero options right from the outset is more important than the individual technology.

At the same time, productivity is becoming a prerequisite for this transformation. Skills shortages, more complex supply chains and higher resilience requirements are driving the need for data-driven engineering, modularisation and digital twins. The next investment cycle will not be won by those who draw up the most ambitious roadmaps, but by those who can implement CCS, hydrogen, recycling, electrification and digital project management in a robust and scalable way.